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Neelkanth School and Neelkanth residency is a twin project. In this the Neelkanth School will manage and operate a CBSE school, while Neelkanth Residency will offer sale of plots near the school. This twin project can be of a great benefit to the investors. The following section will discuss and describes the benefit to the single investors of different types and investing in residential plots with different angle. The single investor may be investing from different point of view. Say he might be investing for the purpose of return, building of future house, sale of existing house and shifting in long run to new house, etc.
In each of the above cases the residents or buyers of plot will help populate the nearby area of school and can get additional benefit with the facility of school. These benefits to the residents of the Neelkanth residency are as under:
Investors in the Neelkanth Residency can be of three possible classes.
The investment scenario of the individual investors that invest in the buying of the plots in Neelkanth Residency has following different possible options:
To compare the benefit of investing in plots and understand its financial implication under different options let us consider four persons investing in the project under different options.
Let us consider following assumptions for different investment options of person, A, B, C and D:
Investing in bank @ Rs. 23,000 (or Rs. 0.23 lacks) per month will make deposit of Rs. 2.8 lacks every year and yearly interest accumulation @ 7% will be Rs. 0.20 lacks in first year. The cumulative deposits of Rs. 0.23 lacks per month till 20 years along with income from interest will add up to Rs. 55.8 lacks. The present value of these investments and interest earned (considering inflation @ 7.5%) will be Rs. 42.7 lacks in the base year. That means for person A, investing @ Rs. 0.23 lacks per month for 20 years can generate a present value of investment equivalent to Rs. 42.7 lacks in the first year of investment.
Unlike person A, person B considers purchase of residence would be a critical need for him in coming years. For this he considers taking loan from bank amounting to Rs. 20 lacks and plans to purchase a residence in this amount in year 2017. He is repaying this loan to the bank by paying through the installment of Rs. 0.23 lacks per month. This will be able to make payment of Rs. 2.8 lacks every year to the bank. Bank will deduct the interest against the unpaid loan amount first and the remaining amount will be considered as a payment towards the remaining borrowed capital. Considering this, interest against loan will be Rs. 2.2 lacks in the first year (out of Rs. 2.8 lacks paid to the bank) and rest will be paid towards borrowed capital. The borrowed capital therefore will be reduced each successive year and hence the interest on the borrowed capital. At the end of 20th year the interest payable on the loan will be zero and paid-up capital against loan will be 100%. The cumulative deposits of Rs. 0.23 lacks per month against the loan till 20 years along with interest will add up to Rs. 44.7 lacks at the end of 20th year. The present value of these payments and interest on the loan will be Rs. 39.69 lacks in the base year. That means person B if paying loan @ Rs. 0.23 lacks per month for 20 years, can get a residence worth of 20 lack in the first year of investment and the net present worth of the payment will be Rs. 39.69 lacks. That means he pays 19.69 lacks as interest.
Person C also considers taking loan from bank of Rs. 20 lacks in year 2017. He is repaying loan to the bank in the installment of Rs. 0.23 lacks per month, this will make payment of Rs. 2.8 lacks every year to the bank, exactly in the same way as that of person B, but instead of purchasing a residence using this amount, he purchases two plots in Neelkanth Residency. His loan repayment schedule will be exactly same as the person B. He will be paying Rs. 2.8 lacks every year to the bank. Bank will deduct the interest against the unpaid loan amount first and the remaining amount will be considered as a payment towards the remaining borrowed capital. Considering this interest against loan will be Rs. 2.2 lacks in the first year (out of Rs. 2.8 lacks paid to the bank) and rest will be paid towards borrowed capital. The borrowed capital therefore will be reduced each successive year and hence the interest on the borrowed capital. At the end of 20th year the interest payable on the loan will be zero and paid-up capital against loan will be 100%. The cumulative deposits of Rs. 0.23 lacks per month against the loan till 20 years along with interest will add up to Rs. 44.7 lacks at the end of 20th year. However, as a change person C will sale one of his plots after a period of 10 years at a price of Rs. 27.92 lacks. This money he will invest in developing remaining plot in a span of 5 years at the rate of Rs. 6 lacks per year. This investment in the residence from 11th to 15th year will give him net present worth of around Rs. 11.78 lacks in first year of operation. The net present worth of loan in first year will be Rs. 39.69 lacks. The net present worth of loan will be reduced by Rs. 11.78 lacks and the resulting net present worth for the loan payment will come down to Rs. 27.92 lacks only. Therefore, under this option person C will take the loan from bank worth Rs. 20 lacks for 20 years and the cost of the loan will be only Rs. 27.92 lacks and in return he will get a well furnished residence of 200 yards.
There are certain investors who wish to invest in the plot but either do not have own funding or do not want to take loan from bank. For these types of investors Neelkanth Residency offers its own installment scheme. Under this a purchaser will be asked to deposit a fixed amount of Rs. 25,000 (0.25 lacks)per month in the account of Neelkanth Residency against purchase of plots for 30 consecutive months. On completion of 15 such installments or Rs. 3.75 lacks the person will be asked to go for the selection of plot in the Neelkanth Residency. At the end of depositing the entire amount equaling to the cost of land the investor will undergo the final purchase agreement with the Neelkanth Residency for the final purchase of selected plot. If a person fails to deposit regular installments or he wish to withdraw from this offer he will be returned the entire amount back, without interest, as per the same schedule as he paid, starting from the date of written confirmation of withdrawal letter to Neelkanth Residency.
Following Figure gives detailed calculations for the financial implication of different investment options.